Out of country investor tax question

2 Replies

Hi, just wondering if someone can help me out who fits a similar tax scenario.

- US Citizen residing outside of the USA, paying taxes in another country on global assets and owning a rental property in the USA

This is the situation I am currently in and wondering if anyone could help me out or at least hear your experience. Do you still file a form E if you are taking advantage of the FEIE and/or foreign tax credit? Does your host country use the form E as any basis for real estate tax liability? How do you report it? I know this differs country to country but I am curious about others' experience.

Thank you

@John Matarazzo

I assume you’re referring to Schedule E where rental property income and expenses are reported.

The short answer is yes you still report it if you’re claiming the FEIE and foreign tax credit as you’re taxed on your worldwide income in the US, which includes the rental property income or loss (which is subject to the passive loss rules in most cases). The FEIE and foreign taxes paid have really nothing to do with your rental income or loss from a US property unless the host country also has a worldwide tax system. The number of countries that actually have this you can count on one hand.

It’s highly doubtful any foreign countries care about the IRS schedule E because they have their own tax systems and even if for some reason your US investments were relevant in the foreign country (again unlikely as most countries have a territorial system limited to activities within their own borders) they would make you report it according to their forms and reporting requirements.

Usually the rental property income taxation and reporting comes into play locally when you have invested in properties located in that country.

Hope this helps

@John Matarazzo

As a US citizen, you are required to report world-wide income.

Rental income is not 'earned income' per FEIE purposes.

Yes, you are required to file a tax return and report the rental income.
You may be eligible for some credits for taxes paid to a foreign country.

Read the tax treaty between the US and the other country taxing you.